A non -variation clause is a contractual provision that restricts the verbal variation or cancellation of an agreement or contract (i.e. if this is not done in writing and/or signed by both parties as the case may be). It often reads that no variation or consensual cancellation of the agreement will affect unless it is reduced into writing and signed by all the parties.

A well-drafted contract is an invaluable tool in ensuring that the relationships that drive your business' success are managed to maintain a smooth, efficient and harmonious operation. The contract is a record of the contracting parties' rights, duties, obligations and remedies in case of a breach.

Ultimately it is about achieving transparency and certainty.

The non-variation clause

A non-variation clause is a mechanism in a contract that prescribes the way or manner in which a variation may take place, and this is called" "a non-variation clause". In some instances, it is called the "whole agreement" or "entire agreement" clause also, whereby it directs that only the written recordal duly signed by the parties constitutes the agreement between them. In addition, supporting clauses may be termed a "no representations", which entail that any discussions leading up to the signed agreement and not expressly included therein are not part of the agreement.

What makes the inclusion of a non-variation clause good or bad?

Firstly, it must be agreed between the parties and that all amendments, changes and alterations (including cancellation) must be reduced to writing and signed by both parties.

In SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren 1964(4) SA 760, the courts developed what is known as the Shifren Principle. Firstly, this Principle entails that when parties agree to insert a non- variation clause in their contract, it should be given effect to. Secondly, the Court held that the insertion of a non- variation clause prevents disputes and the difficulty of proving an oral agreement. The Constitutional Court confirmed this in Industrial Development Corporation of SA v Ballie Foods CC [2007] JOL 19301 (T). In addition, the Court affirmed that the insertion of a non-variation clause voluntarily by parties is a protection mechanism from disputes that may arise from the uncertainty created by oral agreements.

More recently, in the case of Galaxias Properties CC v Georgiou (2015) JOL 33093 (GSJ), the owner (the landlord) of a shopping centre sought the eviction of a tenant. The landlord alleged that the tenant breached the lease agreement by failing to pay the agreed monthly rental timeously for the months of April 2009 and November 2009. The tenant admitted that he had been unable to pay the rent on the first day of the months referred to but alleged that the applicant had condoned the late payments and waived its right to cancel the agreement arising from such late payments constituted an amendment to the agreement. The case was taken on appeal by the aggrieved landlord where the appeal was upheld. The appeal court held that public policy requires that contractual obligations freely and voluntarily undertaken should be honoured. It is apparent that the non-variation clause may afford a contractual party the option of going back on his or her word despite the other party’s reliance on the (purportedly) mutually agreed oral variation. Thus where a party seeks the protection afforded by the Shifren Principle but is motivated by an ulterior motive (, it amounts to an abuse of the due process of law which is contrary to public policy and warrants a departure from Shifren Principle.

It therefore follows that a provision to alter the agreement and the non-variation clause itself is what notably the best inclusion and that the application should be motivated by intent to achieve certainty.

Conclusion

Non-variation clauses are critical to ensuring transparency and legal certainty. In order to get the most benefit from it, it is key to apply it with good intentions. Contact an Attorney at SchoemanLaw for assistance.

Written by Nicolene Schoeman-Louw, Managing Director, Schoeman Law